Reliance Infratel Ltd. and Another vs Bihari Lal

Deepak Gupta, J.—This petition is directed against the order dated 20th April, 2010 whereby the application filed by the Defendant u/s 8 of the Arbitration and Conciliation Act, 1996 (here-in-after referred to as the Act) has been dismissed.

Briefly stated the facts of the case are that the Respondent (here-in-after referred to as the Plaintiff) filed a suit praying that a decree for recovery of Rs. 1,00,000/- plus arrears of rent amounting to Rs. 10,500/- w.e.f. January 2009 onwards, be passed in his favour and against the Defendants. The Defendants, who are the Petitioners before this Court, filed an application u/s 8 of the Act, in which it was prayed that the parties had entered into a lease agreement which contains an arbitration clause and therefore, the suit may not be proceeded with and the dispute arising between the parties be referred to arbitration in terms of Clause 7 (e) of the agreement.

It would be appropriate to quote Clause 7(e) of the agreement which read as follows :

It is hereby expressly agreed that if at any time there shall arise any dispute, doubt or difference or question with regard to interpretation of this agreement or in respect of the rights, duties and the liabilities of the parties hereto arising out of these present then every dispute doubt difference or question shall be referred to arbitration as per the provisions of the arbitration and conciliation act, 1996 and the rules framed there under. Two arbitrators are to be appointed one by each of the parties and third to be appointed by the said two arbitrators. The decision of the arbitrators shall be final and binding to the parties to this deed. The place of arbitration will be....And the language of the arbitration proceedings shall be English.

It is correct that there is a blank space in this agreement which shows that the place of arbitration has not been fixed but it is more than apparent that the parties had agreed to refer all disputes arising between them to arbitration. Section 8(1) of the Act read as follows :

Power to refer parties to arbitration where there is an arbitration agreement.-

(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

The learned Court below did not even care to go through the Section 8 of the Act. It only relied upon Section 11(5) of the Act which empowers the Chief Justice or any other person authorized by the Chief Justice to appoint as an arbitrator. The learned Court did not even care to look at the provisions of Section 8 which clearly provide that when the matter is brought before a judicial authority and the Defendant before filing the written statement raises a plea that the matter is referable to arbitration then such judicial authority in terms of Section 8 of the Act can refer the parties to arbitration. This means that he cannot proceed with the suit any longer and has to direct the parties to go for arbitration in terms of the agreement.

In view of arbitration Clause 7(e) the suit could not have proceeded with and therefore the order of the learned Court below is set-aside and the learned trial Court is directed to return the plaint to the Plaintiff and the parties are directed to refer their disputes to arbitration in terms of the agreement and the Act. No costs.